Industry Players Mostly Pleased with Final Rule on 408(b)(2)

February 3, 2012 (PLANSPONSOR.com) – Members of the retirement plan community were mostly positive about the final rule on 408(b)(2) fee disclosure regulations.

The U.S. Department of Labor’s (DoL) Employee Benefits Security Administration (EBSA) on Thursday issued a final rule on 408(b)(2) fee disclosure and issued a three-month extension to the rule’s effective date (see DoL Issues Final Rule on 401(k) Fee Disclosure). Service providers must be in compliance by July 1, 2012, for new and existing contracts or arrangements between Employee Retirement Income Security Act (ERISA)-covered plans and service providers.   

Larry Goldbrum, general counsel for the SPARK Institute, told PLANSPONSOR  that given the delay in the release, he thinks most recordkeepers already moved forward in January with their planned compliance approach and must adjust it now.  “I think service providers still need to evaluate if they’ll be able to adjust their compliance plans in time for [the July 1] deadline,” he said.   

Jamie Kalamarides, senior vice president of Institutional Investment Solutions for Prudential Retirement, told PLANSPONSOR that his company was prepared for the proposed regulations and thinks that the industry as a whole will be prepared by the July 1 deadline because they had anticipated the original April 1, 2012, cutoff. He said he is pleased with the final rule and said it “gives plan sponsors and plan advisers the tools necessary to provide fiduciary responsibilities.”    

Goldbrum said he is also pleased with the final rule.  “I think overall, this is a good outcome,” he said. “I think the department made some improvements in the final rule.”   

Goldbrum said he is particularly happy that the DoL did not require a roadmap or summary in the final rule, as he said it would be “virtually impossible” to provide by the July 1 deadline. The DoL included an appendix to the final rule with a Sample Guide to get service providers working toward a disclosure roadmap.   

Lynda Abend, managing director of product development at New York Life Retirement Plan Services, said in regards to the Sample Guide, “The DoL will request comments on the summary document and intent to issue further guidance in the near future … We understand the need to be judicious, but the stark reality is sponsors need this information to properly assess the services they receive from their providers in context to the fees associated with the plan.”  

Chris McIsaac, managing director of Vanguard Institutional Investor Group, said his company “commends the Department of Labor for its efforts to create clear and consistent standards for fee disclosure.”   

He continued: “More plan sponsors and participants will now have access to standardized information on plan fees that can help them better understand their plan-related costs and make informed investment decisions.” 

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